Not much for traders to hang their hats on

Kevin Marder is a guest columnist and a co-founder of MarketWatch. He is
principal of Marder Investment Advisors Corp. and a contributor to
The Gilmo
Report. Previously, he served as chief market strategist for Ladenburg Thalmann
Co. and developed institutional fixed-income risk management software for
Capital Management Sciences.

Shares marked time Wednesday, as participants brewed on the possibility of a market-moving event out of Europe at week's end.

On the surface, days like Wednesday do little to resolve the market's direction in the minds of many participants. In fact, they often serve a purpose, even though to an impatient player they may mean next to nothing. In this case, the averages, after last week's meaty rise, the richest for the S&P 500
SPX, +0.59%
since the outset of the bull in March '09, would have been excused for selling off. That they did not, says something about an underlying bullish current.

Too, with Spanish and Italian yields well down off their recent highs, the fever pitch of recent weeks has decidedly ebbed. For the time being.

The view here continues to be that of caution. There has not yet been enough tangible conviction on the part of institutional participants to hang one's hat on, at least if one is a bull. Put this column in the same camp as the man from Missouri — "show me."

Outside of two substantial up days for the eight-day-old advance, only one of them containing impressive volume, an O'Neil follow-through day has yet to materialize. Monday did show a 1.1% rise in the Nasdaq Composite
COMP, +0.50%
and a 1% move in the S&P, both on slightly higher volume. But given the lack of individual stock leadership, this is insufficient to reliably serve as a beacon for an intermediate-term speculator waiting for some proof in order to move off his or her generous cash position.

Thus, there is no hurry to jump into the market, at least for a position trader who traffics in growth-stock leaders. For a more-aggressive player who wants to preempt any possible follow-through day in one or more of the averages, and is willing to shoulder the high risk that this might entail, Golar LNG
GLNG, -0.75%
has been mentioned in recent reports as one to keep an eye on. At current levels, the stock does not offer a traditional entry point that coincides with the top of a base.

Netsuite
N
another that was mentioned in Tuesday's report, is extended following its recent breakout. If the market moves up, it is hard to envision this one not being one of the leaders. For its part, it could have easily succumbed to profit-taking following Monday's thunderous breakout — but didn't. This speaks. Tuesday's inside day was notable, as was Wednesday's good close.

Also noted in Tuesday's report, Ulta Salon Cosmetics and Fragrance
ULTA, -0.85%
has a more substantial pattern with which to enter a position than GLNG or N. In Tuesday's column, it was written that "An aggressive speculator seeking to preempt an O'Neil follow-through day in one or more of the averages could use a takeout of Monday's high of 75.70 as a potential entry, along with a 5%-7% protective sell stop if proven wrong."

Chipotle Mexican Grill
CMG, +0.25%
continues to act well as it works on an 11-week base. Of note was the stock's ability to rise close to 13% recently, with very little pullback, or profit-taking. As noted Tuesday, "A logical entry point would coincide with a breakout of the stock's prior high of 347.94 set Oct. 31. As always, a protective sell stop of, say 5%-7%, should be used in case proven wrong."

One advantage of buying stock when price breaks out to a new high from some form of consolidation or basing pattern is that one is insisting that an issue prove itself before purchase. At a price high, all holders of a stock are happy, as none are sitting underwater with a loss. Therefore, at the moment when price is facing the least amount of resistance, the stock has the greatest probability of rising.

One issue not discussed in some time is Starbucks
SBUX, +0.17%
It is logical to expect the stock to retain some appeal in light of its expected earnings growth of 20%/21% in the September '12/'13 fiscal years. The stock bounced nicely off its 50-day moving average, as shown in the below chart. This is an area that is often used as a spot for institutions to initiate or add to a position. Given its relative strength and good price pattern, the stock could be expected to outperform in any substantial intermediate-term advance. However, given its large size and good, but not superlative, earnings growth, this would not be expected to turn into a big-winning stock that would rank high on an annual "Best Of" list.

The biggest negative is the good-sized number of former leading stocks that are beginning to sell down, or at least drift east without much interest in joining the advance begun last week. These include Apple
AAPL, +1.63%
; Amazon.com
AMZN, +0.17%
; Priceline.com
PCLN, +0.60%
; Pricesmart
PSMT, -0.60%
; Watson Pharmaceuticals
WPI, +7.58%
; Cerner
CERN, +0.67%
which would be a potential short candidate should the averages roll over anew; Baidu
BIDU, +1.83%
; Lululemon Athletica
LULU, +0.67%
; and Fusion-Io
FIO

In summation, "an incredibly blah environment," as one West Coast hedge fund manager put it after Wednesday's close. Maybe so. Yet this type of market serves a purpose, and that is to digest prior gains. The lack of profit-taking the past two days is a short-term plus. The position trader should feel no compunction to put money to work in here, as there is not the overarching institutional participation that needs to be seen to create fertile conditions for intermediate-term speculation.

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